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Economic News, Data and Analysis

Roubini on The Bush Budget

Read this:
Nouriel Roubini’s Global Economics Blog: Bush Damned Budget Lies and Voodoo Budget Magic: it will be a $600b deficit, not $233b by 2009…and over $1,100b by 2015!
Bush Damned Budget Lies and Voodoo Budget Magic: it will be a $600b deficit, not $233b by 2009…and over $1,100b by 2015!
The dishonesty of the administration about budget deficits has reached levels unheard of. These folks have absolutely no shame. Bush presented today a budget that claims that he will achieve his goal of reducing the deficit by half by 2008 (from a false 2004 baseline of $521 billion rather than the actual 2004 deficit of $412b) and will achieve a deficit of “only” $233b by 2009. Even better news, the administration claims today: the “halving” of the deficit will be reached by 2008, a year earlier than original 2009 target for it.
Who are these accounting scam artists trying to deceive? Do they think everyone in America and around the world is a mathematically challenged total idiot or an accounting moron?
The reality is, that based on realistic scenarios outlined last week by the non-partisan Congressional Budget Office, the deficit by 2009 will be close to $600b (or 4.0% of GDP) rather than falling to $233b; and the deficit will reach over $1,100b (or 5.5% of GDP) by 2015.
How do they create the false $233b deficit by 2009?
1. They assume spending cuts that are, by any historical and political standard, impossible to achieve.
2. They assume revenue growth that is altogether wishful thinking and false based on current trends. And they do not consider the long-run costs of making all the Bush tax cuts permanent.
3. They do not count the ongoing costs of the continued defense and homeland security spending and of future military and homeland security build-ups.
4. They phase-in a budget busting social security privatization (that will cost alone $4.5 trillion in the next 20 years) only starting in 2009.
This is worse than dishonesty; it is the most squalid manipulation of budgets ever seen aimed at pretending to achieve a budget figure that is utterly unrealistic and false in every possible dimension.
What would be a more realistic and honest scenario for the 2009 and 2015 budget deficits, given the administration tax goals and the likely path of spending?
Realistic and sensible assumptions imply that the 2009 deficit will be close to $600b (or 4.0% of GDP), even excluding social security reform; and the deficit will reach over $1,100b (or about 5.5.% of GDP) by 2015, including the effects of social security reform.

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